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The share market shrugged off wobbles on Asian markets as bank and travel stocks spearheaded a second rise in three sessions.
The S&P/ASX 200 trimmed an opening 120-point surge to a final gain of 93 points or 1.29 per cent after troubled Chinese property developer Evergrande entered a trading halt.
Commonwealth Bank jumped 5 per cent after completing a share buyback. Fortescue Metals retreated amid concerns about the demand implications of liquidity problems in China’s property markets.
What moved the market
Wall Street laid the foundations for today’s advance with a bright start to the new month. The S&P 500 rose 1.15 per cent on Friday. The Dow gained 1.43 per cent.
Strong early gains were tempered by increasing caution after Evergrande’s various listed entities were suspended in Hong Kong pending a major announcement. Reports from Chinese media outlet Cailian Press suggested rival developer Hopson Development was preparing to take a 51 per cent stake in the property giant’s management unit.
Global equities have struggled amid concerns about contagion if Evergrande, China’s second largest developer, collapses. The property giant has failed to meet several debt repayments in recent weeks. Shares in the parent company have dived more than 80 per cent this year.
“Until recently, Evergrande was one of the world’s largest property developers, but reports out of China suggest that the company could be on the verge of collapse with US$305 billion worth of liabilities,” CommSec senior economist Ryan Felsman said. “Investors are fixated on whether the company can meet interest payments on its debt, avoid default and ultimately avoid collapse.”
US futures soured with Asian markets. S&P 500 futures dipped three points or 0.1 per cent. Hong Kong’s Hang Seng index skidded 2.25 per cent. The Asia Dow shed 0.47 per cent and Japan’s Nikkei 225 index 1.21 per cent. Trade in China was suspended until Friday for Golden Week.
“Aussie investors are indirectly exposed to Evergrande through the Chinese property sector’s insatiable demand for iron ore,” Mr Felsman added. “The price of the steel-making ingredient – Australia’s most important export – has already halved from record highs of around US$233 a tonne in May, following China’s clampdown on the property sector and pollution. A downdraught in Chinese property prices would further subdue construction and reduce iron ore demand.”
Fortescue Metals retested last month’s 14-month low, easing 1.17 per cent. Champion Iron dropped 3.02 per cent. Rio Tinto and BHP traded underwater before closing 0.23 and 0.24 per cent ahead, respectively.
Winners’ circle
Travel and tourism stocks rose ahead of next Monday’s ‘Freedom Day’ in New South Wales. Flight Centre jumped 9.61 per cent to its highest since March 2020. Webjet gained 2.94 per cent, Corporate Travel Management 3.33 per cent, Star Entertainment 3.17 per cent and Qantas 1.75 per cent.
Commonwealth Bank firmed 5.08 per cent after completing a $6 billion off-market share buy-back. The largest of the big four banks bought back roughly 3.8 per cent of its issued shares. The offer was so popular the bank had to scale back applications by 79.4 per cent.
ANZ improved 2.15 per cent, NAB 1.94 per cent and Westpac 2.13 per cent. Macquarie Group put on 0.8 per cent.
Furniture retailer Nick Scali surged 10.38 per cent after acquiring specialist sofa retailer Plush-Think for $103 million in cash. Plush has 46 showrooms across Australia.
Boral gained 4.19 per cent after completing the sale of its North American building products business for US$2.15 billion and the sale of its Australian timber business for $64.5 million. The building materials firm will use the proceeds to reduce debt and return excess capital to shareholders.
Utilities were among the pick of the sectors following a pause in surging bond yields at the end of last week. Origin Energy gained 3.36 per cent, APA Group 0.92 per cent and AGL Energy 1.9 per cent.
Doghouse
Health giant CSL eased 0.53 per cent during a soft session for the sector as investors favoured sectors with better exposure to the economy. Pro Medicus slid 2.38 per cent, ResMed 1.42 per cent and Fisher & Paykel 0.53 per cent.
Tech stocks were mixed. Xero dropped 2.07 per cent, Megaport 2.01 per cent and Appen 1.21 per cent. A 0.66 per cent lift in Afterpay cushioned the sector from a deeper fall.
Other markets
Oil eased before tonight’s OPEC+ meeting. Brent crude declined 20 US cents or 0.25 per cent to US$79.08 a barrel.
Gold rose US$3 or 0.17 per cent to US$1,761.40 an ounce following the Evergrande news.
The dollar slipped 0.03 per cent to 72.72 US cents.
